Question

Baker Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product.

Production volume	10,000	units	12,000	units
Direct materials	$614,000		$736,800
Direct labor	$185,000		$222,000
Manufacturing overhead	$1,008,300		$1,042,500

The best estimate of the total cost to manufacture 10,800 units is closest to: (Do not round intermediate calculations.)

$1,791,660

$1,861,590

$1,884,900

$1,931,520

Answer 1

	Per unit costs
	10000 units	12000 units
Direct materials	61.40	61.40
Direct labor	18.50	18.50
Manufacturing overhead	100.83	86.88
Form the above calculation, it can be seen Direct materials and Direct labor is variable cost
Manufacturing overhead is a mixed cost
Variable Manufacturing overhead = (1042500-1008300)/(12000-10000)= $17.1 per unit
Fixed Manufacturing overhead = 1042500-(12000*17.1)= $837300
Total variable cost per unit = 61.40+18.50+17.10= $97
Total cost to manufacture 10,800 units =(10800*97)+837300= $1884900
Option 3 $1,884,900 is correct